AOP Content and Trends Census 2013

This year’s survey, carried out in July and August by AOP’s Head of Research and Insight, Tim Cain, shows publishers increasingly looking to drive value from data for both content and commercial models.

There’s a strong emphasis on commercial activity and the value of publishers’ data in this year’s Census. Advertising growth is expected to continue at a
bullish pace into 2014 with a third of publishers predicting growth of 6-10%, against two thirds predicting double digit growth, including the most
optimistic third who see revenues exceeding 20% growth over the next twelve months. The survey has found that the move towards programmatically traded
advertising models is accelerating with three quarters of publishers expecting to engage more in real time bidding over the coming twelve months compared
to less than half who agreed with the same sentiment in last year’s Census.

The Content and Trends Census is now in its fifth year and has evolved over time to give a deeper view of the key drivers within the digital business of
many of the UK’s leading publishing companies. It acts as a benchmark for the digital publishing industry in terms of where publishers are currently at and
also captures their intentions for development over the next twelve months. The central theme of this Census is content models and platforms and, in
particular, a focus on mobile and tablet activity. Online video and social media interaction are also covered along with a number of key commercial
criteria and an overview of the major opportunities, threats and challenges digital publishers are facing.

A total of 34 organisations, representing well over 700 respected publisher brands and publications, and around £1 billion of digital revenue, from AOP
Board and Affiliate membership, completed the survey this year.

Commercial models

As publishers acknowledge the demand for automated trading, driven primarily by the buy-side agency and advertiser community, they are increasingly looking
to unlock value from their audience data by exposing more first party data. Aligned to this, they are increasingly likely to participate in private
marketplace activity where they can exercise greater control over access to their inventory. Two thirds of publishers expect to increase private
marketplace activity over the coming twelve months and almost as many are committed to exposing more first party data.

AOP Chairman John Barnes has commented that “first-party data establishes the value of a publisher’s inventory to advertisers and, along with their
editorial content, and overlays of third party data, are their crown jewels.”

We have seen increasing concern expressed by publishers, however, to retain control over their audience data, and 36% of publishers believe agency demands
for their first-party data pose the biggest challenge to the industry. Barnes goes on to say “agencies and networks don’t have audiences - they rely on
third-party behavioural and intent data to target users - whereas publishers have a trusted relationship with readers that delivers first-party data.
Publishers need to protect this data, stop leakage and find ways of demonstrating its value without giving away key information.”

So, as buying becomes increasingly automated, publishers could lose control. As agreements with agency trading desks become more common, one in two
publishers expecting to do more in the coming twelve months, the question of data and ownership will be at the forefront of publishers’ commercial
strategies. The more ardent supporters of programmatic trading amongst publishers are seeing opportunity though in using their first party data to target
audiences offsite and extend the value of their commercial proposition, and now almost one in two will be pursuing that policy more over the coming twelve
months.

The scale of opportunity afforded by programmatic is creating an interesting and split view amongst publishers, with 39% saying it offers a major
opportunity and 42% a small one. It will be interesting to check on how that view has moved in another twelve months when we will have seen significantly
more commercial deals going down this route.

Content models

If we move on from commercial to content models, we see that 62% of publishers are charging for content somewhere in their portfolio or will be during the
next twelve months; in fact for one in four, it’s on all or the majority of their sites. At the same time, of course, that also means that more than one in
three (38%) aren’t charging. Totally free access will be the prominent model in around 30% of cases, a reduction year-on-year inevitably as more
experimentation is introduced to find value that consumers recognise and accept.

So, if at one end of the spectrum, we have around a third apply free content access models, at the other extreme, we have 15% applying subscription
packages, most often combining on and offline products. In between, freemium is the model showing most growth, with one in four publishers suggesting it
will be the most prominent model in the next twelve months; that’s more than are currently applying it, and more than twice as many as will apply a metered
model before subscription.

As far as the view on pricing goes, there’s a mixed outlook; almost one in two publishers are expecting to implement increases on gated sites compared to
one in three on paid apps. So while the app model evolves, we are seeing the majority of pricing staying in place until there’s a longer trend of data
available.

Device is driving the view on revenue opportunities from content of course. The iPad / tablet apps and dynamic digital editions are seen to offer the best
platform for paid content opportunities, amongst one in four publishers, slightly ahead of the standard sites and straight PDF apps on iPad and other
tablets. Full paid app models appear to be less prominent in publishers’ plans looking ahead; only 21% expecting to apply more to mobile and 29% to tablet,
whilst freemium in both cases is a slightly more likely model, seen by a third of publishers.

Focus on mobile & tablet

With the emphasis firmly on multiplatform delivery, we can expect publishers’ focus on investment and business priorities to be driven heavily by mobile
and tablet development, enabling great mobile experiences and monetising the mobile proposition. Revenue diversification will come through monetising cross
platform, audience growth, creating revenue per user, and having more paid content. In that respect, publishers are committed to greater application of
HTML5, responsive design, and focusing strongly on user experience and developing a product-centric development culture.

There is currently a platform gulf in revenues that publishers are seeking to close, as for instance, the percentage of publishers who take 20% or more of
their impressions from mobile (smartphone) is 42% yet the percentage who take 20% or more of revenue from mobile is only 3%. If we look at tablet, the gap
is obvious too but isn’t quite as wide, 16% taking 20% or more impressions that way while 6% take an equivalent share of revenue.

70% of publishers have the majority of their portfolios optimised for mobile now, a growth of over 10% year-on-year and 27% have m.sites across the
majority. Ensuring seamless delivery of content on mobile and tablet is clearly important. As last year, overall, the revenue opportunity via mobile is
seen to be mainly hindered by agencies’ attitudes or focus, and formats and reporting (both for one in two publishers) and the dependency on low yield ad
networks and creation of interactive ads (one in three publishers). For tablets, the size of audience is the clearest inhibitor followed by agency
attitudes and creation of interactive ads (both one in four). The most significant revenue generation models for mobile are seen to be unique mobile ad
formats (56%) and sponsorship (47%) ahead of in-app ads (41%) whilst for tablet, it’s also unique ad formats (50%) ahead of digital editions (44%) and
in-app ads and sponsorship.

In keeping with previous Census results, mobile and tablet are seen as the biggest areas of opportunity and also challenge. The most prominent
opportunities noted for the next twelve months are iPad / tablets (84%) and mobile advertising and content marketing, both recognised by three quarters of
publishers and the latter two becoming more prominent compared to previous studies. Mobile internet generally and apps and digital editions for tablets
specifically, also feature in the top five perceived opportunities for the coming year. Four out of five publishers see mobile web generally as the
priority for content delivery, with other priorities away from desktop being iPad / tablet fully integrated apps (68%) and smartphone apps (56%).

The main issues affecting mobile and tablet development are seen to be in-house skills and resource (56%), integrating mobile with current sales teams and
implementing responsive design (both 41%) and device fragmentation (38%).

Overall, in summary, this year’s Content and Trends Census presents another bullish view of growth by digital publishers over the coming twelve months. The
challenge will increasingly be technology led as publishers are striving as ever to deliver great content with great user experience, whilst drawing fair
value for their content and finding new models for advertising that reflect the platforms that audiences are using.

Tim Cain is the owner of consultancy firm Digital First Media. Tim has more than 20 years’ experience in the media industry. Previously, he was managing director of AOP. He has also held senior publishing roles at EMAP and Bauer Consumer Media and was a board director of UKOM and member of JICWEBS.

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